Puerto Rico Act 60 and Act 38 of 2026: What Business Owners and Investors Need to Know Before December 31, 2026

How the new law changes the individual investor tax incentive — and why the application deadline matters more than the move date.

Published: March 2026 | By Rolando Lopez, CPA

For U.S. entrepreneurs, investors, and digital asset professionals considering Puerto Rico as a tax strategy, the rules just changed. On March 10, 2026, Governor Jenniffer González signed Act No. 38 of 2026 into law, amending Puerto Rico's Incentives Code (Act 60-2019) in ways that directly impact anyone planning to relocate for tax advantages.

This is not proposed legislation. Act 38 is now in full effect, and the window to secure the most favorable tax treatment is narrowing.

Below, we break down what changed, what remains in place, and the specific planning considerations for investors to evaluate before December 31, 2026.

What Is Act 60 and Why Does It Matter?

Puerto Rico's Act 60 program (formerly Acts 20 and 22) is a tax incentive framework designed to attract capital and investment to the island. Because Puerto Rico operates as a U.S. territory under Section 933 of the Internal Revenue Code, qualifying residents can access significant tax reductions while maintaining U.S. citizenship.

Act 60 contains two primary programs that our clients most frequently evaluate:

1. Export Services Program (for businesses). Service-based companies operating from Puerto Rico and serving clients outside the island can qualify for a 4% corporate income tax rate on qualifying business income, along with 100% tax-exempt dividends from the Puerto Rico entity. Compare that to a 21% federal corporate rate or up to 37% on pass-through income at the federal level, before state taxes.

Qualifying businesses include Web3 and SaaS companies, family offices, private equity firms, consulting firms, law firms, marketing agencies, and eCommerce DTC Brands, among others.

2. Individual Resident Investor Program (for individuals). Individuals who relocate and establish bona fide Puerto Rico residency have historically qualified for a 0% tax rate on capital gains, dividends, and interest income sourced to Puerto Rico. This has been particularly attractive for investors, crypto traders, founders with pending future exit, and individuals managing large investment portfolios.

What Changed Under Act 38 of 2026

Act 38 of 2026 makes the following changes to the Individual Resident Investor program:

The 0% rate becomes 4% for new applicants. Any individual who submits an Act 60 Individual Resident Investor application on or after January 1, 2027, will be subject to a 4% tax on capital gains, dividends, and interest accrued after establishing Puerto Rico residency. The prior 0% rate is no longer available to new applicants after that date.

Business programs are not affected. The Export Services program, manufacturing incentives, and tourism incentives under Act 60 remain unchanged. The 4% corporate rate on qualifying export income and the 100% dividend exemption for businesses are fully intact.

Program extended through 2055. Act 38 extends the Act 60 program by 20 years, from the prior 2035 sunset to December 31, 2055. This provides long-term certainty for investors and businesses planning multi-decade strategies on the island.

New residency eligibility requirement. Applicants submitting on or after January 1, 2027, must demonstrate that they were not a Puerto Rico resident during the six years immediately preceding their move to the island.

The Critical Deadline: December 31, 2026

This is where the planning opportunity exists. Act 38 establishes that the application submission date — not the date of physical relocation or decree approval — determines which tax rate applies.

Submitting a complete application before December 31, 2026, preserves access to the 0% rate, even if the decree is issued in 2027 or later. This means the clock is on the application — not the move.

What Happens to Existing Decree Holders?

Individuals who already hold an approved Act 60 Individual Resident Investor decree are not affected by Act 38. Their 0% rate on capital gains and other passive income sourced to Puerto Rico remains intact for the remaining term of their decree, through December 31, 2035.

However, current decree holders who wish to extend their term beyond December 31, 2035, will need to adopt the new 4% preferential rates on passive income at that point. This is a planning consideration for anyone with a long-term Puerto Rico strategy who currently holds a decree.

Example: How Act 60 Reduces Tax Liability

Consider an entrepreneur earning $1M per year from a services business who relocates to Puerto Rico and qualifies for Act 60:

• Business income: 4% Puerto Rico corporate rate vs. up to 37% federal + state on the mainland
• Capital gains (0% rate, submitted by 12/31/2026): $0 Puerto Rico tax vs. up to 23.8% federal + state
• Capital gains (4% rate, submitted 1/1/2027 or later): 4% Puerto Rico and 0% federal

For a business owner at this income level, the difference between mainland taxation and Act 60 can represent hundreds of thousands of dollars in annual tax savings — while remaining fully compliant with U.S. law.

What It Takes to Qualify

For individuals seeking the Individual Resident Investor decree:

• Establish bona fide Puerto Rico residency (183+ days per year on the island)
• Apply for and receive an Act 60 tax decree
• Establish a personal tax home and economic ties to Puerto Rico
• For post-2026 applicants: demonstrate non-residency in Puerto Rico for the prior six years

For businesses qualifying under the Export Services program:

• Services must be rendered from Puerto Rico to clients located outside the island
• A registered Puerto Rico entity must be established
• Puerto Rico-based employees or contractors providing services

Why 4% Remains Globally Competitive

Even at the revised rate, Puerto Rico remains one of the world's most advantageous jurisdictions for individual investors. A qualifying resident realizing a Puerto Rico sourced capital gain from securities or cryptocurrency would pay 4% to Puerto Rico and 0% to the IRS — compared to a combined federal and state rate that can exceed 30% on the U.S. mainland.

For high-net-worth individuals, crypto traders, and founders planning a liquidity event, the program's value remains substantial. The difference is that the most favorable window — the 0% rate — is closing for new applicants at the end of 2026.

How CFO Associates Supports Act 60 Planning

At CFO Associates, we work with high-net-worth families and individuals, crypto investors, and business owners evaluating Puerto Rico's tax incentive programs. Our team provides:

• Evaluation of whether Act 60 fits your financial profile and long-term goals
• Entity formation and structuring for Puerto Rico operations
• Dual U.S. and Puerto Rico tax compliance and filing coordination
• Identification of common IRS and PR Treasury compliance pitfalls before they become problems

If you are considering Act 60, or want to understand how Act 38 of 2026 affects your current situation, schedule a strategy call with our team. We will help you determine whether the program can reduce your tax burden based on your facts and guide you through every step of the move.

Share this article with a business owner or investor you know who is evaluating Puerto Rico. The December 31, 2026 deadline applies to everyone.

Important Disclaimer: This article is intended for informational purposes only and does not constitute legal, tax, or financial advice. The information herein reflects Act No. 38 of 2026 as signed into law on March 10, 2026. Tax laws and implementing regulations are subject to further change. Please consult a qualified tax professional or attorney before making any decisions based on this content.